Home Energy Efficiency Improvement Tax Credit

Frequently Asked Questions

What is the stimulus law?

The recently enacted American Recovery and Reinvestment Act of 2009 (ARRA) includes several tax incentives for making residential energy efficiency improvements. Click on the ARRA link above and go to page 208 to read about the Non-Business Energy Property Tax Credit for 20092010. Go to page 205 to read about the Residential Energy Efficient Property Tax Credit for 20092016.

What is the Non-Business Energy Property Tax Credit?

You may be eligible for a 30% federal tax credit if you buy and place into service qualified energy efficiency upgrades during 2009 or 2010. Eligible upgrades include certain exterior doors, windows, skylights, insulation, and heating and cooling systems. Upgrades that are installed after February 17, 2009 must meet the energy efficiency standards required by ARRA. Installation costs are generally not eligible for the tax credit, except for certain HVAC upgrades. The Non-Business Energy Property Tax Credit is available only for qualified upgrades made to your primary, existing residence. A maximum of $1,500 may be applied towards the tax credit.

What is the Residential Energy Efficient Property Tax Credit?

Certain renewable energy improvements made to existing homes or new construction may be eligible for the Residential Energy Efficient Property Tax Credit. This federal tax credit is also 30%, but there is no maximum dollar limit. The improvements must be purchased and placed into service between January 1, 2009 and December 31, 2016. Qualified improvements include certain solar panels, solar water heaters, small wind energy systems, or geothermal heat pumps. The purchase price and installation costs are generally eligible for the renewable energy tax credit.

What is the tax credit for fuel cells?

A 30% federal tax credit may also be available for certain residential fuel cells that are purchased and placed into service on or after January 1, 2009. The tax credit applies up to a maximum of $500 for each half kilowatt of capacity. For fuel cells that are used in dwelling units that are jointly occupied by at least two people, the tax credit applies up to a maximum of $1,667 for each half kilowatt of capacity.

What is the tax credit for plug-in electric vehicles?

If you buy or lease a plug-in electric vehicle between January 1, 2010 and December 31, 2014, you may qualify for a federal tax credit. The vehicle must be purchased or leased new, and it must meet the additional standards required by ARRA. The tax credit has a base amount of $2,500. An additional credit of $417 may be available for each kilowatt hour (kWh) in excess of 5 kWh, up to a maximum of $5,000 per vehicle. A calendar quarter phase-out of the tax credit begins to apply once the manufacturer has sold 200,000 or more qualified plug-in electric drive vehicles for use in the U.S. Click here to visit the True Cost Auto Web site.

How much are the tax credits worth?

  • The Non-Business Energy Property Tax Credit is available for qualified energy efficiency upgrades made to primary, existing residences. The tax credit is 30%, up to a maximum total of $1,500 for 2009 and 2010.
  • The Residential Energy Efficient Property Tax Credit is available for qualified renewable energy improvements made to new construction or existing home. The tax credit is 30%, with no maximum dollar limit, for the 20092016 federal tax years.
  • The fuel cell tax credit is 30%, up to a maximum of $500 for each half kilowatt of capacity. For fuel cells that are used in dwelling units that are jointly occupied by two or more people, the tax credit maximum is $1,667 for each half kilowatt of capacity. In the case of fuel cells that are purchased and placed into service on or after January 1, 2009.

When do the tax credits expire?

  • The Non-Business Energy Property Tax Credit is available from January 1, 2009 through December 31, 2010.
  • The Residential Energy Efficient Property Tax Credit is available from January 1, 2009 through December 31, 2016.
  • The fuel cell tax credit is available from January 1, 2009 through December 31, 2016.

What is a "qualified improvement" under ARRA?

  • For the Non-Business Energy Property Tax Credit, qualified improvements include the purchase price of certain exterior doors, windows, skylights, non-solar water heaters, insulation, and heating and cooling systems. The installation cost of qualified HVAC upgrades may also eligible for the tax credit. The upgrades must be made to a primary, existing residence.
  • For the Residential Energy Efficient Property Tax Credit, qualified improvements include the purchase price of certain solar panels, solar water heaters, small wind energy systems, or geothermal heat pumps. Installation costs are also generally eligible for the tax credit. The improvements can be made to existing homes or new residential construction.

Can I claim the credit as soon as I buy a qualified improvement?

No. ARRA requires that the qualified improvements be purchased and placed into service in order to claim either the Non-Business Energy Property Tax Credit or the Residential Energy Efficient Property Tax Credit. The IRS defines "placed in service" as when the property is ready and available for use.

Are there any income limitations?

No. The energy efficiency tax credits are available for qualified residential improvements, regardless of income.

How do I claim the Non-Business Energy Property Tax Credit?

The Non-Business Energy Property Tax Credit is claimed on IRS Form 5695 for the 2009 or 2010 tax years. The credit is claimed for the year in which the qualified improvements were made to your primary residence. If the upgrade is placed into service after February 17, 2009, make sure that it meets the new energy efficiency standards required by ARRA. The credit can be applied against 30% of the purchase price, up to a maximum of $1,500. Make sure to get a manufacturer's certification of energy efficiency. This may be provided on the packaging or on the manufacturer's Web site. Also make sure to keep a copy of the sales receipt and a receipt from your contractor, with material and labor costs broken out.

Are there any income limitations?

Yes. A phase-out of the credit begins if modified Adjusted Gross Income (AGI) exceeds $75,000 for single-filers, or $150,000 for joint-filers. The phase-out is calculated as 2% of any income that is above those limits. The phase-out is complete at $95,000 modified AGI for single-filers, or $190,000 for joint-filers.

How do I claim the Residential Energy Efficient Property Tax Credit?

The Residential Energy Efficient Property Tax Credit is also claimed on IRS Form 5695 for the 20092016 tax years. The credit is claimed for the year in which the qualified improvements were made to your primary residence. You must purchase and place into service qualified improvements to an existing home or new construction. Make sure to get a manufacturer's certification of energy efficiency. This may be provided on the packaging or on the manufacturer's Web site. Also make sure to get a receipt from your contractor with material and labor costs listed separately.

Can the stimulus tax credits be combined with other credits or rebates?

Yes, in some cases your home energy efficiency improvements may qualify for more than one tax incentive or rebate. Some states also offer energy efficiency tax incentives and some utilities offer energy efficiency rebates. Contact your state's energy department or click here to learn more about state, local, or utility energy efficiency incentives.

Where can I get more information?

  • To read about the ARRA Non-Business Energy Property Tax Credit, click here and go to page 208. To read about the ARRA Residential Energy Efficient Property Tax Credit, go to page 205.
  • Click here to review information about federal tax incentives for energy efficiency on the U.S. Department of Energy's Energy Star Web site.
  • Click here to learn more about state tax incentives or state or utility rebates for energy efficiency upgrades.
  • Consult your tax advisor for more information based on your specific circumstances.
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The information contained herein is drawn from sources that are believed to be reliable, but it cannot be guaranteed as to completeness or accuracy. The content is not intended to be, and should not be relied upon as, tax, legal, or financial planning advice. Consult your tax advisor for specific advice.

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